Bitcoin Traders Brace for Bank of Japan Rate Hike Amid Crypto Sell-Off
The Bank of Japan (BOJ) is set to conclude a two-day policy meeting on Friday, with expectations mounting for a second rate hike this year. This move signals a continued normalization of monetary policy despite the prevailing global environment of low interest rates. A key consequence of a BOJ rate hike is the potential unwinding of the yen carry trade, which could reduce liquidity flowing into risk assets such as Bitcoin.
Bitcoin has experienced a significant decline, down approximately 30% from its October 6 high of $126,080 to around $87,800 as reported on CoinGecko. Analyst Czhang Lin of LBank Labs notes that the unwinding of the carry trade would cause liquidity to shift toward the U.S. dollar, potentially exerting pressure on cryptocurrency markets. Meanwhile, Matt Hougan, an analyst at Bitwise, observes that the opposing global monetary forces—Japan tightening and the U.S. easing—may offset each other, leading to muted long-term returns for cryptocurrencies but increased near-term volatility.
Prediction-market platform Myriad has assigned a 66% probability that Bitcoin will retest the $100,000 level, a slight decline from 72% a week earlier, reflecting cautious optimism among traders. Markets anticipate short-term downward pressure as Japan reaches a 30-year-high rate, and reduced liquidity around holiday periods is likely to amplify volatility and increase the risk of liquidations. Crypto traders are particularly focused on the BOJ's guidance regarding its future rate trajectory and the implications for yen-funded carry-trade unwinding in the coming week.
